Markets fluctuate into weekend

Strong week for stock markets

It’s been a relatively relaxed start to trading on the final day of the week, with equity markets in an out of positive territory and hoping to extend their winning streak following Thursday’s turnaround.

Needless to say it’s been a very encouraging couple of weeks for investors, full of post-Christmas cheer. We’ve almost halved the deficit in the S&P 500, Dow and NASDAQ, having entered into bear market territory in two of these, and investors have become less gloomy about the outlook.

That’s not to say that challenges don’t still exist for the global and domestic economy, or that a slowdown isn’t still expected this year. But improved trade relations between the US and China and progress towards a deal and away from tariffs is undoubtedly positive and reduces a major headwind. The same is true of the Fed and it’s shift to more flexibility on rate hikes.

Brexit vote on Tuesday a major source of sterling volatility

One important headwind, particularly domestically, is Brexit and we are now heading into another crunch week. Debates have begun in parliament on Theresa May’s deal ahead of the vote on Tuesday, assuming this one isn’t cancelled, and traders will be preparing for significant volatility in UK instruments, particularly the pound, going forward.

The deal is widely expected to be rejected and by quite a margin which opens the door to numerous possibilities in the coming weeks including a no confidence vote in the government, a push for a second referendum and of course, no deal planning. The latter looks less likely after this week’s amendments in parliament but it’s certainly still possible. The pound has been relatively steady this week but I don’t expect that to last long. Obviously, May’s deal somehow passing should be very bullish for the pound but nothing ever is that straightforward, especially when Brexit is concerned.

Gold heading higher again on softer dollar

Gold is pushing higher this morning, supported once again by a weaker dollar. The greenback did pare some of Wednesday’s losses yesterday but that’s all it was, with the break the day before looking quite significant from a technical standpoint and potentially opening up a move back towards the July and September lows.

This means the $1,300 resistance level in gold is looking very vulnerable and could be a case of when, rather than if, it breaks. Risk aversion has been supportive for gold but as we’re seeing now, it’s primary driver is the dollar. And the dollar softening as trade relations between the US and China improves should continue to lift gold.

Economic Calendar

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.

MarketPulse is a forex, commodities, and global indices analysis, and forex news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.

OANDA (Canada) Corporation ULC accounts are available to anyone with a Canadian bank account. OANDA (Canada) Corporation ULC is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), which includes IIROC's online advisor check database (IIROC AdvisorReport), and customer accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request or at www.cipf.ca.

OANDA Europe Limited is a company registered in England number 7110087 limited by shares with its registered office at Tower 42, Floor 9a, 25 Old Broad St, London EC2N 1HQ and is authorised and regulated by the Financial Conduct Authority, No: 542574.

OANDA Asia Pacific Pte Ltd (Co. Reg. No 200704926K) holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore and is also licenced by the International Enterprise Singapore.

OANDA Australia Pty Ltd is regulated by the Australian Securities and Investments Commission ASIC (ABN 26 152 088 349, AFSL No. 412981) and provides and is the issuer of the products and/or services on this website. It's important for you to consider the current Financial Service Guide (FSG), Product Disclosure Statement ('PDS'), Account Terms and any other relevant OANDA documents before making any financial investment decisions. These documents can be found here.